2025-11-04 21:03:14
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Amazon (AMZN) just gave Wall Street the proof it was waiting for.
Last Friday, we discussed AWS as the “most likely beneficiary” of the new deal between Microsoft and OpenAI, after Azure lost its right of first refusal on cloud infrastructure.
Well, well, well. AWS and OpenAI just inked a $38 billion seven-year deal, granting OpenAI access to hundreds of thousands of NVIDIA GPUs, with the option to scale to tens of millions of CPUs for agentic workloads.
The timing couldn’t be better. AWS growth just accelerated to 20% Y/Y, its best performance in nearly three years, showing that Amazon’s aggressive CapEx, now expected to reach $125 billion in FY25, is paying off. The stock jumped over 10% after earnings as investors rewarded tangible progress on AI monetization.
CEO Andy Jassy’s message was simple:
“We’re going to continue to be very aggressive in investing in capacity because we see the demand. As fast as we’re adding capacity right now, we’re monetizing it.”
With AWS revenue scaling past a $132 billion annual run rate, Amazon has turned a narrative of market-share anxiety into one of renewed conviction.
Today at a glance:
Amazon Q3 FY25.
The OpenAI deal implications.
Key quotes from the call.
What to watch moving forward.
Income statement:
Revenue breakdown:
💻 Online stores (37% of overall revenue): Amazon.com +10% Y/Y.
🏪 Physical store (3%): Primarily Whole Foods Market +7% Y/Y.
🧾 3rd party (24%): Commissions, fulfillment, shipping +12% Y/Y.
📢 Advertising (10%): Ad services to sellers, Twitch +24% Y/Y.
📱 Subscription (7%): Amazon Prime, Audible +11% Y/Y.
☁️ AWS (18%): Compute, storage, database, & other +20% Y/Y.
Other (1%): Various offerings, small individually +8% Y/Y.
Revenue rose +13% Y/Y to $180.2 billion ($2.4 billion beat).
Gross margin was 52% (+2pp Y/Y).
Operating margin was 10% (+0pp Y/Y).
AWS: 35% margin (-3pp Y/Y).
North America: 5% margin (-1pp Y/Y).
International: 3% margin (-1pp Y/Y).
EPS $1.65 ($0.39 beat).
Cash flow:
Operating cash flow TTM was $131 billion (+16% Y/Y).
Free cash flow TTM was $15 billion (-69% Y/Y), driven by the operating cash flow growth, offset by a 78% rise in Capex to $116 billion.
Balance sheet:
Cash, cash equivalent, and marketable securities: $94 billion.
Long-term debt: $51 billion.
Q4 FY25 Guidance:
Revenue ~$209.5 billion ($1.4 billion beat).
Operating income $21 to $26 billion (+11% Y/Y in the mid-range).
So, what to make of all this?
☁️ AWS rebounds: AWS revenue rose 20% Y/Y to $33 billion, accelerating from 17% Y/Y in Q2 and the fastest pace since 2022, showing that AI infrastructure demand is translating into growth. Custom chips and new data-center capacity helped offset power and supply constraints. Of course, AWS trails Azure’s 39% and Google Cloud’s 34% growth from lower bases, but it’s still adding the most revenue from a dollar standpoint.
📦 Retail steady: Non-AWS revenue grew 12% Y/Y, including 11% growth in North America and 14% internationally. Prime sign-ups held steady, showing shoppers still see value despite inflation and tariffs.
🏗️ Peak CapEx: Free cash flow dropped sharply as capital expenditures ballooned past $34 billion in a single quarter. Amazon leads the world in capital spending, guiding $125 billion for FY25.
📢 Advertising keeps firing: Ad revenue surged 24% Y/Y to $17.7 billion, outpacing both Google Search and YouTube. Integrations with Roku, Disney, and Prime Video are expanding Amazon’s connected-TV footprint, while a new multi-touch attribution model is sharpening ROI and boosting advertiser confidence. This high-margin segment remains a pillar of the bull case.
📉 Margins hold: Operating income reached $17.4 billion (flat Y/Y), but excluding one-time legal and severance costs, profits would exceed $21 billion. Company-wide margins stayed near 11%, supported by retail efficiencies and ad mix, yet free cash flow collapsed to $14.8 billion as AI-driven capex accelerated.
🔮 Guidance stays grounded: For Q4, Amazon projects $206–213 billion in revenue (+10–13% Y/Y) and $21–26 billion in operating income, implying steady but not explosive growth.
2025-11-02 23:02:23
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🏝️ Travel: Booking, Hilton.
💬 Social: Meta, Reddit, Roblox.
🚗 Automotive: Tesla, GM, Ford.
🍿 Entertainment: Netflix, Roku.
🌮 Franchises: Chipotle, Domino’s.
💊 Biopharma: AbbVie, Merck, J&J.
🔬 Equipment: ASML, Lam Research.
🛩️ Defense: Boeing, Lockheed Martin.
🍫 Food: Hershey, Kraft Heinz, Mondelez.
🏥 Healthcare: UnitedHealth, Intuitive, Align.
🥤 Beverage: Coca-Cola, Constellation, Pepsi.
☁️ Big Tech: Apple, Amazon, Google, Microsoft.
✈️ Airlines: American, Delta, Southwest, United.
📞 Telecom: AT&T, Comcast, Verizon, T-Mobile US.
💳 Payments: Amex, Fiserv, Visa, Mastercard, PayPal.
💰 Wealth: Morgan Stanley, Goldman Sachs, BlackRock.
⚙️ Semis: Arm, Cadence, Intel, KLA, Qualcomm, TSMC, TXN.
🏦 Banks: JPMorgan, BofA, Wells Fargo, Citigroup, Schwab, SoFi.
💻 Software: Atlassian, Confluent, Cloudflare, IBM, SAP, ServiceNow.
Plus Adidas, Coinbase, Etsy, MercadoLibre, P&G, GE Vernova, and more.
2025-11-01 22:02:02
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Today at a glance:
📱Apple: Blockbuster Holiday Forecast
🕶️ Meta: Revenue Soars Alongside Spending
💊 Eli Lilly: GLP-1s Defy Headwinds
💳 Visa: Global Spending Stays Strong
💳 Mastercard: Differentiated Services
📱 Samsung: Chip Profit Soars
💊 AbbVie: Immunology Booms
💼 UnitedHealth: Reset in Motion
🦠 Merck: Growth Drivers Sputter
🧑💻 ServiceNow: AI Fuels Blowout
🛩️ Boeing: 777X Slips Again
🏝️ Booking: Momentum Improves
📱 Verizon: Broadband Still the Engine
🔬 KLA: China Rules Bite
🤝 Mercado Libre: Brazil Squeezes Margins
💡 Cadence: AI Drives Beat
📈 Coinbase: Derivatives Surge
👾 Roblox: Losses Overshadow Bookings
🍪 Mondelez: Peak Cocoa Costs
☁️ Cloudflare: Net Retention Rebounds
📦 UPS: Cost Cuts Stoke a Turnaround
💳 Fiserv: Massive Miss Triggers Reset
💳 PayPal: Agentic Commerce Boost
🌯 Chipotle: Consumer Pullback
☁️ Atlassian: AI & Cloud Migration Boost
👽 Reddit: Profitability Surges
👟 Adidas: Brand Heat Overcomes Tariffs
🍫 Hershey: Cocoa Pressures Ease
🏦 SoFi: Records Keep Falling
🌭 Kraft Heinz: Guidance Cut Again
📊 Confluent: Flink Takes Off
📦 Etsy: Changing Guard
🏡 Appfolio: Margins Pinched
Apple’s September quarter (fiscal Q4 FY25) revenue rose 8% Y/Y to $102.5 billion ($220 million beat) with EPS of $1.85 ($0.08 beat). Results were driven by a record Services quarter, though iPhone sales were slightly below consensus.
📱 iPhone sales grew 6% Y/Y to $49.0 billion ($1.0 billion miss). While this reflects Q3’s pull-forward we previously discussed, management cited supply constraints on new iPhone 17 models as the primary limiting factor amid “very strong demand.”
💻 Mac sales were also a bright spot, rising 13% Y/Y to $8.7 billion.
💳 Services grew 15% Y/Y to a record $28.8 billion ($600 million+ beat), crossing the $100 billion annual revenue mark for the first time and continuing to boost Apple’s margin profile.
Despite a $1.1 billion tariff hit on costs (in line with guidance), Gross margin improved slightly at 47%, aided by the revenue mix.
Geographically, China was a weak spot, down 4% Y/Y, though other regions set records.
The muted Q4 was completely overshadowed by Apple’s blockbuster Q1 guidance:
Total Revenue: 10%-12% Y/Y growth (far above consensus).
iPhone Revenue: Double-digit Y/Y growth.
China: Expected to return to growth.
Tariff Costs: Expected to rise to $1.4 billion.
Management highlighted that the strong outlook is supported by heavy R&D investment in AI and Apple Intelligence, which is now driving higher operating expenses. The record Q1 forecast signals powerful demand for the new product cycle, calming any fears of a slowdown.
Meta posted another blowout quarter on the top line, with Q3 revenue surging 26% Y/Y to $51.2 billion ($1.8 billion beat). However, GAAP EPS plummeted to $1.05, massively missing estimates due to a one-time, non-cash $15.9 billion income tax charge related to a new US tax law. Excluding the charge, EPS would have been $7.25, easily beating consensus.
Ad strength remained exceptional, with impressions up 14% Y/Y and average price per ad climbing 10%. Daily active people across the Family of Apps rose 8% Y/Y to 3.54 billion. The core business is firing on all cylinders, funding Meta’s accelerating AI ambitions.
But Wall Street didn’t cheer. The stock slid as AI ambition met cold, hard spending math. Management raised its 2025 CapEx outlook slightly to $70-$72 billion (tightening the bottom end from $66 billion). The real sticker shock came from guidance beyond that: 2026 CapEx will be “notably larger” and total expenses will grow at a “significantly faster percentage rate.”
Zuck doubled down on “aggressively” front-loading AI infrastructure investments to pursue Superintelligence, shaking investor confidence about near-term returns. While Q4 revenue guidance ($56-$59 billion) was strong (+22% Y/Y on the high-end), the open-ended commitment to accelerating AI spending overshadowed the impressive core business performance.
If you’re feeling déjà vu, you’re not alone. Meta faced the same skepticism when it poured billions into the Metaverse. The stock took a hit back then, too — until strong execution turned sentiment around.
2025-10-31 20:03:01
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Microsoft’s September quarter contained a hidden bombshell: a $4.1 billion loss from its equity-method investment in OpenAI.
The implication? OpenAI’s losses are even wilder than you thought: roughly $15 billion in the latest quarter alone.
This staggering figure lands as Microsoft and OpenAI renegotiated their landmark partnership, turning OpenAI into a for-profit public benefit corporation (PBC). Microsoft now holds a 27% stake in the new entity and has locked in long-term rights to its models. OpenAI gets the freedom to scale on other clouds, but is committed to $250 billion in Azure spending.
To put that in perspective, OpenAI is projected to generate $13 billion in revenue for all of 2025.
If the AI boom ever cracks, it might start here. OpenAI’s CapEx appetite could eventually outpace its ability to fund it, pulling investors and vendors into the fallout. There’s no shortage of capital for now, but eventually, the bill will come due.
Here’s what stood out this quarter.
Today at a glance:
Microsoft’s Q1 FY26.
The new OpenAI agreement
Earnings call takeaways.
What moves the needle.
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Revenue +18% Y/Y to $77.7 billion ($2.3 billion beat)
Gross margin 69% (flat Y/Y).
Operating margin 49% (+2pp Y/Y).
EPS $4.13 ($0.47 beat).
☁️ Server products and cloud services $28.9 billion (+30% Y/Y).
📊 M365 Commercial products and cloud services $24.0 billion (+17% Y/Y).
🎮 Gaming $5.5 billion (-2% Y/Y).
👔 LinkedIn $4.7 billion (+10% Y/Y).
🪟 Windows and Devices $4.6 billion (+5% Y/Y).
🔎 Search and news advertising $3.7 billion (+15% Y/Y).
💻 Other $6.4 billion (+15% Y/Y).
As a reminder, Microsoft restructured its business segments last year to better align reporting with current operations:
📊 Productivity and Business Processes grew 17% Y/Y to $33.0 billion ($0.7 billion beat). M365 Commercial and Consumer drove upside, with Copilot adoption fueling ARPU gains.
☁️ Intelligent Cloud grew 28% Y/Y to $30.9 billion ($0.7 billion beat), driven by Azure across all workloads.
🎮 More Personal Computing grew 4% Y/Y to $13.8 billion ($0.9 billion beat), with Search ads and XBOX hardware softening.
The table below compares growth year-over-year in constant currency following the new segmentation. Some of the products and services overlap.
Microsoft Cloud grew 25% Y/Y to $49.1 billion. It now accounts for 63% of total revenue. Broad-based momentum across Azure and M365, with Copilot attach and usage now meaningful but still early in terms of revenue recognition.
Azure is running the show and driving the growth of ‘Server products and cloud services’ and Microsoft Cloud. It showed no slowdown this quarter.
Consumer products saw another big acceleration on the M365 side, boosted by an ARPU growth from the recent price increase and subscriber growth of 7%.
Xbox growth has normalized after the Activision acquisition was completed in Q2 FY24. GamePass could not offset a continued decline in hardware sales.
Advertising grew at the same pace as Google Search this quarter, despite a much lower base (less than 7%).
Operating cash flow grew 32% Y/Y to $45.1 billion.
Free cash flow grew 33% Y/Y to $25.7 billion.
Cash, cash equivalents, and investments: $102 billion.
Long-term debt: $35 billion.
📈 Azure is still supply-constrained: Headline growth will bump around quarter to quarter. While there are many moving pieces, both GCP and AWS managed to accelerate this quarter.
🏗️ Capex shock—by design: Capex hit ~$34.9 billion in the quarter (+74% Y/Y), with roughly half on chips and the rest on data-center real estate. Microsoft says AI capacity will grow over 80% in FY26 and its data-center footprint will roughly double in two years—telegraphing that elevated spend is front-loaded to unlock constrained Azure demand.
🔌 Still hitting the wall on power & space: Management guided Azure growth to 37% Y/Y next quarter and reiterated that supply bottlenecks will linger—think grid interconnects, power, and buildouts—so mix and pricing (vs. pure volume) still do some heavy lifting in the interim.
📊 Forward visibility improved: Commercial RPO rose 51% to $392 billion, a new high. That backlog—tilted to multi-year AI/infra commitments—keeps a floor under growth even if capacity gating continues.
🧠 OpenAI is a below-the-line drag: Other expenses were a $3.7 billion hit, including $4.1 billion of losses from Microsoft’s equity-method investment in OpenAI. Ex-OpenAI, other income was actually positive (thanks to interest income), which helps explain why operating results looked sturdier than GAAP net income suggests.
💵 Capital returns continue: Despite outsized CapEx, Microsoft returned $10.7 billion via buybacks/dividends, an approach in contrast with Amazon, which hasn’t repurchased stock in years, and doesn’t pay a dividend.
The new agreement reshapes where Microsoft benefits most, and where it must now compete. Azure gets guaranteed scale deep into the next cycle, but OpenAI has more freedom than ever to work with other partners and chase AGI on its own terms.
Here’s a look at the cap table of the new OpenAI Public Benefit Corporation (PBC):
What Microsoft gets:
27% of the new OpenAI PBC (valued at ~$135 billion).
Commercial rights to OpenAI models through 2032, including post-AGI breakthroughs.
Azure demand locked with $250 billion in OpenAI contracted spending.
No more exclusive cloud route (OpenAI can pursue other infrastructure).
If OpenAI claims AGI, an independent expert panel must verify it.
Once AGI is confirmed (or in 2030), revenue-sharing ends and access to OpenAI research narrows.
Microsoft can pursue AGI independently, but compute is capped if built on OpenAI tech.
Why it matters: The rewritten terms remove a valuation overhang for Microsoft, with investors now able to fully credit its OpenAI stake. The Azure commitment also helps justify record AI capex with deep demand visibility. But by giving OpenAI freedom to fundraise and expand across clouds and revenue streams (including ads), the deal widens the competitive front against AWS and raises fresh concerns for Alphabet.
Microsoft just overhauled Game Pass and raised prices, and the reaction has been spicy.
New tiers and prices: Ultimate jumps 50% to $29.99/mo. Microsoft says the lineup expands (400+ games, 75+ day-one titles, Ubisoft+ Classics, 1440p cloud), but the sticker shock is real.
Confusion globally: PC Game Pass also rises (from $11.99 to ~$16.49/mo), Ultimate’s Call of Duty add-on discount was quietly pulled, and some regions saw staggered timing on the hike.
Why the hike now: Reporting from Bloomberg suggests Call of Duty Black Ops 6 on day-one Game Pass last year cannibalized as much as $300 million in sales, even as it spiked subs, pushing Microsoft to rebalance the economics.
Competitive context: Sony has been nudging PS Plus pricing and catalogs, but without a comparable day-one model, which helps preserve full-price sales on PlayStation.
Platform > plastic: Nadella says the strategy is to make Xbox a layer across devices—smart TVs, PCs, handhelds, cloud apps—so “hardware is one endpoint, not the endpoint.” That lines up with the Fire TV/TV-app push, PC focus, and selective first-party releases on rival platforms.
What that means for Game Pass: More endpoints = larger TAM, but less leverage from console exclusivity. Economics must come from ARPU lift (tiering, add-ons, cross-buy) and IP monetization at full price when day-one doesn’t make financial sense.
Bottom line: Game Pass is pivoting from growth-at-all-costs to a premium, multi-endpoint bundle that protects flagship IP. The “everything is an Xbox” move widens reach but weakens the old console-lock playbook—so success hinges on ARPU expansion and IP pricing discipline. If sub churn from price hikes outpaces ARPU gains—or if cross-platform releases blunt differentiation—Sony keeps the advantage while regulators keep asking hard questions.
Check out the earnings call transcript on Fiscal.ai here.
Satya Nadella and Amy Hood shared critical milestones across Microsoft’s portfolio.
"We will increase our total AI capacity by over 80% this year and roughly double our total data-center footprint over the next 2 years […] Fairwater (WI) will scale to 2 GW alone.”
Azure’s supply crunch is real. Microsoft is front-loading build-outs (multi-GW sites) to unlock constrained demand.
"Microsoft Cloud revenue $49B (+26%) […] commercial RPO up 50% to nearly $400B with a ~2-year weighted-average duration."
A record backlog of $368 billion gives Microsoft multi‑year revenue visibility and validates its aggressive AI CapEx ramp.
"We now expect FY26 CapEx growth rate to be higher than FY25."
The CapEx peak is not yet in. Management is prioritizing share capture while signals stay hot.
"We now have 900 million MAU of AI features […] first-party Copilots surpassed 150 million MAU. […] Copilot chat adoption is accelerating—up 50% Q/Q […] agent users doubled Q/Q. […] PwC added 155k seats this quarter […] 200k+ deployed […] 30M interactions in 6 months […] saving millions of hours in productivity."
The feature-to-agent shift is happening. Usage intensity is rising, implying pricing power and ARPU runway ahead.
"We’ve been short capacity for many quarters […] demand is increasing across many places […] short-lived assets match contract duration. […] We say no to demand that’s too concentrated by customer/location/workload […] we’re building a fungible fleet for 1P and 3P."
Build risk is mitigated by duration-matched gear and booked demand, so this isn’t blind overbuild. Discipline on deal mix protects long-run margins and optionality.
🔌 Azure demand: OpenAI’s $250 billion Azure commitment turns AI demand into backlog-like visibility and helps justify record AI capex intensity, but keep the execution risk in mind. Now, the shift in cloud market share will tell the main story.
☁️ Multi-cloud chessboard: Removal of Azure's right-of-first-refusal frees OpenAI to court AWS (the most likely beneficiary). Oracle sentiment improves with funding clarity. Google faces risk if OpenAI expands successfully into ads and browser-based agents.
💸 Capex supercycle endurance: Microsoft signaled AI data center spend measured in gigawatts with FY26 capex tracking over $110 billion. Returns hinge on keeping utilization high as rivals scale.
🧠 Copilot monetization vs. adoption: The runway is huge across M365, but paid seat conversion remains the gating factor. Microsoft is pushing packaging and seller motions to expand attach.
🎮 Gaming monetization mix: Game Pass plan changes and Activision library moves keep subscription ARPU and engagement in focus as hardware cycles normalize.
⚖️ Regulatory friction: EU pressure already forced Teams’ unbundling. Scrutiny of AI tie-ups and cloud dominance continues in the UK/EU, which could shape pricing and bundling.
Next up:
A massive PRO coverage tomorrow with over 30 companies visualized.
Deep dive into Amazon’s earnings next week for Premium readers. We’ll visualize how the cloud race stacks up.
That’s it for today!
Stay healthy and invest on.
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Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
Disclosure: I own AMZN, CRM, GOOG, and META in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
2025-10-30 07:14:21
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The stock has nearly doubled from its April lows, despite all the talk about OpenAI coming for Google’s jugular.
So what’s happening?
Antitrust relief: The regulatory fog has partly lifted. A Chrome divestiture is off the table for now, removing one of the worst-case scenarios.
TPU megadeal: Anthropic just locked in access to up to 1 million Google Cloud TPUs, bringing over 1 GW of AI compute online in 2026. The agreement is “worth tens of billions,” implying meaningful revenue growth acceleration for GCP.
What are TPUs, anyway?
Tensor Processing Units are Google’s custom AI chips, offering faster and more efficient performance than traditional GPUs for training and running large models. Introduced in 2016 to power Search and Translate, TPUs have been available through GCP since 2018 for researchers and select enterprises. What’s new today is scale. Anthropic’s multi-year deal marks the first hyperscale deployment of TPUs by an external AI lab—turning them from a niche option into a credible alternative to NVIDIA’s GPUs.
It’s a marquee win for TPUs. If more deals follow, it could become a meaningful revenue engine, even for a $3+ trillion company like Alphabet.
Here’s what stood out this quarter.
Today at a glance:
Alphabet Q3 FY25.
TPUs & going nuclear.
Key quotes from the call.
Chrome, Atlas, and antirust update.
Revenue grew +16% Y/Y to $102.3 billion ($2.2 billion beat).
🔎 Advertising: $74.2 billion (+13%).
Search: $56.6 billion (+15%).
YouTube ads: $10.3 billion (+15%).
Network: $7.4 billion (-3%).
📱 Subscriptions, platforms, and devices: $12.9 billion (+21%).
☁️ Cloud: $15.2 billion (+34%).
Margin trends:
Gross margin: 60% (+1pp Y/Y).
Operating margin: 31% (-2pp Y/Y).
Services (Advertising & Other): 39% (-2pp Y/Y).
Cloud: 24% (+7pp Y/Y).
Earnings per share (EPS) grew 35% Y/Y to $2.87 ($0.61 beat).
Operating cash flow was $48.4 billion (+58% Y/Y).
Free cash flow was $24.5 billion (+39% Y/Y).
Cash, cash equivalents, and marketable securities: $98.5 billion.
Long-term debt: $21.6 billion.
New milestone: Alphabet’s revenue topped $100 billion for the first time, rising 16% Y/Y (+15% Y/Y in constant currency, up from +13% Y/Y in Q2), and net income surged +33% Y/Y to $35 billion.
Search rose +15% Y/Y, driven by retail and financial services. AI Overviews and ‘AI Mode’ are boosting engagement, turning last year’s cannibalization fears into a tailwind as commercial intent rebounds.
YouTube Ads jumped +15% Y/Y, driven by both brand budgets and direct-response. Shorts now see 200 billion daily views, while YouTube Premium helped lift total paid subs beyond 300 million.
Subscriptions, platforms & devices climbed to +21% Y/Y, reaching a $50 billion annual run rate for the first time, led by One and Pixel hardware.
Cloud posted a +34% Y/Y growth, up from +32% Y/Y in Q2, pushing trailing-12-month (TTM) revenue above $50 billion and a record $155 billion backlog (more on this in a minute). Operating income in the unit jumped 85% to $3.6 billion, signaling strong leverage.
Margins & Capex: Company-wide operating margin held firm at 31%, despite record AI and infrastructure spending. Alphabet raised its 2025 CapEx outlook to $91–93 billion (up from ~$85 billion), after spending $24 billion in Q3. Most of that is going into data centers, TPUs, and AI infrastructure — the physical backbone of Gemini and Cloud.
💡 Key takeaway: Alphabet is executing on both sides of the AI equation: monetization through ads and subscriptions, infrastructure expansion through Cloud and compute. With revenue growth reaccelerating, margins holding strong, and capex ramping, the company is firmly back on offense.
Anthropic’s partnership now spans training, inference, and dedicated capacity, marking the first hyperscale deployment of Google’s in-house AI chips by an external lab.
Like most AI deal announcements, it comes down to the equity portion, strategy, and long-term revenue implications.
2025-10-25 22:00:36
Welcome to the Saturday PRO edition of How They Make Money.
Over 200,000 subscribers turn to us for business and investment insights.
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📊 Monthly reports: 200+ companies visualized.
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Today at a glance:
🏭 Intel: Cash Infusion
☁️ SAP: Cloud Revenue Caution
🥤 Coca-Cola: Volumes Rebound
🧴 P&G: Tariff Relief Softens Blow
🌐 IBM: AI Bookings Surge
📶 T-Mobile US: Acquisition Boost
📞 AT&T: Subscriber Surge
🧠 Lam Research: China Headwinds
⚙️ Texas Instruments: Recovery Slows
⚡ GE Vernova: Electrification Surge
🦾 Intuitive Surgical: Da Vinci 5 Accelerates
🛰️ Lockheed Martin: Execution Rebounds
🏨 Hilton: Unit Growth Shines
🚗 GM: Guidance Soars
🚙 Ford: Novelis Fire Hits Outlook
🛩️ Southwest: Transformation Delivers
🦅 American Airlines: Profit Outlook Returns
Intel’s Q3 revenue rose 3% Y/Y to $13.7 billion ($560 million beat), and non-GAAP EPS was $0.23, crushing estimates by $0.22 and returning the company to profitability.
Client Computing ($8.5 billion) and Data Center & AI ($4.1 billion) both topped expectations, driven by early signs of a PC refresh cycle and accelerating AI demand. Foundry revenue declined 2% Y/Y to $4.2 billion, but its operating loss narrowed significantly to $2.3 billion from $3.2 billion last quarter.
CEO Lip-Bu Tan highlighted improved execution and strategic progress, particularly in AI, citing partnerships with NVIDIA and SoftBank that boosted confidence and cash reserves. Intel strengthened its balance sheet considerably, ending the quarter with nearly $31 billion in cash, helped by $5.7 billion in US government funding and $5.2 billion from divestitures in Altera (spun off) and Mobileye. Restructuring remains on track, and next-gen Panther Lake CPUs are slated for launch soon.
Still, the outlook tempered enthusiasm. Intel guided Q4 revenue to ~$13.3 billion ($0.1 billion miss, though roughly flat sequentially ex-Altera). Crucially, gross margin is expected to fall back to ~36.5% (from 38%) due to mix shifts and new product ramps. While management raised the CY25 PC market outlook and pointed to strong AI demand, ongoing supply constraints (expected to peak in Q1’26) and the weak margin guidance caused the stock’s initial post-earnings rally to fade, signaling that the turnaround still faces significant hurdles.
SAP’s Q3 revenue rose 7% Y/Y to €9.1 billion (a slight €10 million miss), while non-IFRS EPS came in strong at €1.59 (€0.09 beat). Non-IFRS operating profit increased 15% Y/Y, reflecting continued margin discipline.
Cloud revenue slightly missed estimates, climbing 22% to €5.3 billion (or 27% in constant currency (cc)). ERP Cloud growth moderated slightly to 31% cc (from 34% in Q2). The current cloud backlog remained healthy, up 27% cc to €18.8 billion.
CEO Christian Klein highlighted strong adoption across the Business Suite, including Business Data Cloud and AI, stating SAP is gaining market share. The company pointed to a strong Q4 pipeline, bolstered by deals pulled forward from 2026 and notable wins like a $1 billion contract with the US Army. SAP reiterated its application-focused strategy, partnering with infrastructure providers rather than competing directly like Oracle.
However, management signaled persistent macro headwinds. SAP now expects cloud revenue towards the lower end of its €21.6–€21.9 billion range, while guiding non-IFRS operating profit towards the upper end of its €10.3–€10.6 billion range. Free cash flow guidance was slightly raised to €8.0–€8.2 billion. Despite the cloud revenue caution, management expressed confidence in executing against its strong Q4 pipeline and achieving accelerating total revenue growth in 2026.
Coca-Cola’s Q3 revenue grew 5% Y/Y to $12.5 billion ($90 million beat), while adjusted EPS was $0.82 ($0.04 beat). Global unit case volume returned to growth, rising 1% after dipping last quarter, while price/mix remained strong at +6%.
